SEOUL, Sept. 6 (Korea Bizwire) – Samsung Electronics may be praised for its swift decision to recall faulty Galaxy Note 7 phablets, but its affiliate Samsung SDI (SSDI), which was responsible for the production of some of the defective batteries, is facing a crisis.
According to industry watchers, SSDI has tentatively halted its supply of batteries for the Galaxy Note 7, and is focusing on examining the root cause of the battery fires and explosions.
The company provided roughly 70 percent of the batteries for the new phablet, with the remainder coming from China’s Amperex Technology Ltd. SSDI started manufacturing lithium-ion rechargeable batteries in 2000, and has since become one of the world’s leading battery suppliers.
However, Samsung Electronics suggested during its September 2 recall announcement that it would consider expanding from two to three battery suppliers, leaving the future of its relationship with SSDI somewhat in the dark.
“For obvious reasons, SSDI’s battery supply for the Galaxy Note 7 has stopped, but it’s still supplying batteries for other Samsung products including the Galaxy series,” an industry source said. “But because there aren’t many global manufacturers (less than five according to the source) that can deliver the lithium polymer batteries used for the Galaxy Note 7, the more urgent matter at hand is to identify the cause (of the explosions).”
The issue of exploding batteries, however, is only a part of SSDI’s concerns. The company has already been struggling with its EV battery business in China, and has had trouble getting local authorities to certify its batteries.
An EV battery produced by SSDI has already failed to pass the Chinese government’s model criteria authentication, and is now waiting for China’s fifth deliberation procedure for battery certifications. Since China only provides subsidies for EVs built with government-authenticated batteries, passing the evaluation is critical for SSDI’s success in China.
Furthermore, with the ongoing diplomatic aggravations over Korea’s decision to deploy a THAAD battery, the Samsung affiliate also has to cope with speculation over China’s potential economic retaliation, said an industry official.
“Given SSDI’s financial burdens related the cost of the recall and the potential reduction in sales of the Galaxy Note 7, its operating losses ($49 million in Q2) will inevitably increase,” said Lee Seung-hyun, a researcher at Korea Investment & Securities. “In addition, with China delaying its battery authentication evaluation, SSDI shares continue to dive.”
By Kevin Lee (email@example.com)